J.P.Morgan Remains Cautious about New Bizjet Demand

“Caution” is the word when it comes to demand for new business jets, according to J.P.Morgan North America Equity’s latest business jet monthly report, issued today. Though most business jet manufacturers continue to see weak demand at the lighter end of the market and better prospects at the higher end, J.P.Morgan is concerned about Embraer’s recent comments about “incremental softness at the high end.”

While J.P.Morgan attributes some of this to Embraer’s product positioning in the higher end (mainly the super-midsize Legacy 650), the Brazilian aircraft manufacturer cited overall emerging-market weakness. “This clearly bears watching in light of slowing GDP growth,” J.P.Morgan researchers said. “A U.S. pickup would more than offset an emerging-market slowdown for the market overall, but it is not clear that sentiment among U.S. buyers is improving, and while U.S. flight ops have picked up a bit they are still only barely growing.” According to the FAA, U.S. business jet operations grew 1.8 percent year-over-year in June.

Meanwhile, pre-owned business jet inventory changed little at 10.1 percent last month, but inventory of aircraft less than five years old, “which competes more directly with new aircraft,” declined by 0.6 points, to 6.8 percent, “around the average level of the past eight years,” J.P.Morgan said. However, it added, pricing remains “strikingly weak,” with average asking prices for used in-production models down 2.1 percent sequentially in July.